Artificial Intelligence: Impact on Economy and Employment

In part two of this three-part series on AI, we look at how AI is likely to shape the world economy, especially economic growth and the impact on the workforce of the future. Click the link for Part 1, which looks at the historical development of AI.

“The future has already arrived. It's just not evenly distributed yet.”

These famous words from renowned author William Gibson can best describe the momentum AI is currently enjoying. From an up and coming technology, it has very much become a here and now technology, and AI-based tools and services have seamlessly integrated themselves into our lives.

However, like any other technology, some markets are seeing an early uptake of AI (the “future” as foreseen by Gibson), while others are still far away (the “not evenly distributed” part of Gibson’s above quote).

Accordingly, different markets are expected to be impacted differently by AI and related technologies. However, what unites all beneficiary markets is that the impact of AI will only be positive, with the only divergence being the scale of impact in each market.

Factors leading to economic benefits from AI

There are many benefits of using AI in businesses and once deployed. It leads to higher productivity gains and higher efficiency, which in turns boosts economic output and enhances the economy. A few of the main advantages that AI brings to businesses are described below.

• Improved Decision Making è AI helps business gain better insights into their data and thus support “data-driven” decision making, which improves the quality of decision-making and related business outcomes. For example, Deloitte is creating an automated process that improves human decision making by predicting and simulating future outcomes, powered by AI.

• Efficiency based on Automation è AI-supported automation is helping businesses become more efficient by better utilizing available resources and freeing up unused resources to be deployed for better use. For example, by intelligently automating some of the most routine tasks, businesses can make savings to the tune of 40% to 75%.

• Productivity Gains è AI’s scale of work helps reduce, or sometimes totally remove, long manual hours spent on the production process. These gains translate to higher output in a similar timeframe, as well as lower (labour and related) costs, to produce the same output. This twin benefit leads to better business outcomes, while expending fewer resources. An example of this is the use of AI in developing software, where AI tools can help test the code, thus freeing up developers for more creative and engaging tasks.

• Personalized Services & Experiences è The recommendation engines of services such as Netflix (content recommendations) and Amazon (what next to buy recommendations) are very successful examples of AI-based tools with personalized output. Similar personalization is also happening in other industries, such as healthcare, where AI is helping develop customized treatment plans for complex diseases such as cancer.

Figure 1: The Benefits of AI

Source: Huawei Consulting

The above are only a few of the main benefits that AI enables for business. Economies that are at the vanguard of AI adoption thus stand to rake in the most economic benefits from this trend.

Impact of AI on different regions globally and the arrival of Industry 5.0

AI is expected to have a massive impact on the global economy and is forecast to contribute about US$15.7 trillion to global GDP in 2030. This increment will be partly due to increased productivity gains (totalling US$6.6 trillion) and partly due to increased consumption (US$9.1 trillion). The increased consumption will derive from the greater availability of personalized services as well as the introduction of newer AI-enhanced products and services.

From a regional perspective, the regions expected to witness the largest impact from AI are China and North America.


Figure 2: AI's Impact on Global GDP in 2030 by region

Source: PwC

The growth of AI and its economic boom is also paving the way for the 5^th industrial revolution or Industry 5.0. This refers to robots and smart machines working alongside people, with added resilience and sustainability goals included. Thus, Industry 5.0 seeks to add human, environmental, and social aspects into the industrial equation. AI is at the heart of this new revolution.

The use cases of AI-backed Industry 5.0 are many-fold. For example, within healthcare, doctors can use AI-assisted tools for analysing patient records and thus provide better data regarding future treatment plans. Within manufacturing, AI tools can connect to cameras and other sensors in real time and thus spot and isolate any defects even while a product is being made. These are only a few examples, and there are countless other applications of AI and Industry 5.0 use cases.

National initiatives to boost AI research & adoption

The future impact of AI on various regions is linked directly to the efforts the business and governments are currently making in this domain.

• In 2017, China launched its Next Generation AI Development Plan for the domestic development of AI technology, aiming for the country to become the world's 'major AI innovation centre' by 2030. By 2020, it had become the leading nation with respect to the number of research papers on AI published and the number of AI-related patents.

• Similarly, in 2023, the US government passed the Executive Order on the Safe, Secure, and Trustworthy Development and Use of Artificial Intelligence to establish new standards for AI safety, security, and related issues. Previously in 2018, the US government had earmarked a multi-year investment pot of over US$2 billion for AI research in a portfolio of about 50 programs, collectively called the “AI Next” campaign.

• In 2021, the UK government released its National AI Strategy, a ten-year plan to make the country a global AI superpower by 2030.

• In Europe in 2023, the EU AI Act was passed, making Europe the first continent in the world to set clear rules for the use and development of AI.

• In 2018, India introduced its National Strategy for AI (#AIFORALL), representing an inclusive approach to AI. The strategy emphasizes essential areas for national focus in AI innovation and application, encompassing healthcare, education, agriculture, smart cities, and transportation.

These above are only a few examples of national and regional AI policy frameworks and development approaches.

Impact of AI on the jobs of tomorrow

Disclaimer: Any views and/or opinions expressed in this post by individual authors or contributors are their personal views and/or opinions and do not necessarily reflect the views and/or opinions of Huawei Technologies.